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Military expenditure and economic development in China: an empirical inquiry

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  • Fumitaka Furuoka
  • Mikio Oishi
  • Mohd Aminul Karim

Abstract

Increases in military spending have a big impact on the socioeconomic conditions in any country. However, there is no consensus as to whether the rising military expenditure is beneficial or detrimental to economic growth. The present study chose China as a case study to empirically examine a complex relationship between military expenditure and economic development. The findings from the Johansen cointegration test indicated that there existed a long-run relationship between China’s military spending and economic growth. Furthermore, the Granger causality test detected a unidirectional causality from economic development to military expenditure. These results were further confirmed by the findings from the impulse response function. This means that China represents an example of a developing economy where the size of military expenditure expands in the process of economic transformation.

Suggested Citation

  • Fumitaka Furuoka & Mikio Oishi & Mohd Aminul Karim, 2016. "Military expenditure and economic development in China: an empirical inquiry," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 137-160, February.
    • Handle: RePEc:taf:defpea:v:27:y:2016:i:1:p:137-160
    DOI: 10.1080/10242694.2014.898383
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    1. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191.
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    1. Ullah, Assad & Zhao, Xinshun & Kamal, Muhammad Abdul & Zheng, JiaJia, 2020. "Modeling the relationship between military spending and stock market development (a) symmetrically in China: An empirical analysis via the NARDL approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 554(C).
    2. Luqman, Muhammad & Antonakakis, Nikolaos, 2021. "Guns better than butter in Pakistan? The dilemma of military expenditure, human development, and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    3. Ologbenla Patrick, 2020. "Military Expenditure and Macroeconomic Perfromance – The Case of an Emerging Country," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 65(1), pages 67-83, April.
    4. Charles Shaaba Saba & Nicholas Ngepah, 2019. "A cross-regional analysis of military expenditure, state fragility and economic growth in Africa," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 2885-2915, November.
    5. Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2015. "Asymmetric Granger Causality between Military Expenditures and Economic Growth in Top Six Defense Suppliers," Working Papers 201565, University of Pretoria, Department of Economics.
    6. Agus Harimurti Yudhoyono & Fendy Suhariadi & Elisabeth Supriharyanti & Zulkifli Nurul Haqq, 2024. "Economic Transformation: A Systematic Literature Review," Sustainability, MDPI, vol. 16(24), pages 1-16, December.
    7. Kyriakos Emmanouilidis & Christos Karpetis, 2020. "The Defense–Growth Nexus: A Review of Time Series Methods and Empirical Results," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(1), pages 86-104, January.
    8. Chiwei Su & Yingying Xu & Hsu Ling Chang & Oana-Ramona Lobont & Zhixin Liu, 2020. "Dynamic Causalities between Defense Expenditure and Economic Growth in China: Evidence from Rolling Granger Causality Test," Defence and Peace Economics, Taylor & Francis Journals, vol. 31(5), pages 565-582, July.
    9. Muhammad Azam & Faisal Khan & Khalid Zaman & Amran Md. Rasli, 2016. "Military Expenditures and Unemployment Nexus for Selected South Asian Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(3), pages 1103-1117, July.
    10. Tsung-pao Wu & Dian Fan & Tsangyao Chang, 2016. "The Relationship Between Globalization And Military Expenditures In G7 Countries: Evidence From A Panel Data Analysis," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(3), pages 285-302.
    11. Ahad, Muhammad & Dar, Adeel Ahmad, 2017. "Modeling the Asymmetric Impact of Defense Spending on Economic Growth: An Evidence from Nonlinear ARDL and Multipliers," MPRA Paper 80085, University Library of Munich, Germany, revised 2017.
    12. Ming Zhong & Tsangyao Chang & Samrat Goswami & Rangan Gupta, 2014. "The Nexus between Military Expenditures and Economic Growth in the BRICS and the US: A Bootstrap Panel Causality Test," Working Papers 201449, University of Pretoria, Department of Economics.
    13. Bran Alexandra-Carmen, 2024. "Trends in the Political Economy of Military Expenditure. The Case of Europe," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 18(1), pages 459-468.
    14. Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2018. "Asymmetric causality between military expenditures and economic growth in top six defense spenders," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(3), pages 1193-1207, May.
    15. Nusrate Aziz & M. Niaz Asadullah, 2017. "Military spending, armed conflict and economic growth in developing countries in the post-Cold War era," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(1), pages 47-68, January.
    16. Yingying Xu & Hsu Ling Chang & Chi Wei Su & Adelina Dumitrescu, 2018. "Guns for Butter? Empirical Evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(7), pages 809-820, November.
    17. Liming Zhao & Liang Zhao & Bing-Fu Chen, 2017. "The interrelationship between defence spending, public expenditures and economic growth: evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(6), pages 703-718, November.

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